Constellation Brands (STZ -0.80%) and Anheuser-Busch InBev (BUD 0.03%) both sell alcohol. The former produces beer, wine, and spirits, and the latter is the world's largest brewer by volume.
Typically, alcohol companies do well in good and bad times. Of course, these remain uncertain times, particularly given economic policies such as tariffs. That makes it challenging to figure out how consumers will react.
Still, investors should concentrate on the long term. Which of these two alcoholic beverage companies is better positioned to reward shareholders over the long haul?
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Constellation Brands
Constellation Brands concentrates on selling its alcoholic beverages at the higher end of the market. The company sells under brands like Modelo Especial, Corona Extra, Pacifico, and Robert Mondavi Winery.
Eighty-four percent of total fiscal-year sales, or $8.5 billion, were derived from beer products. This was for the fiscal year that ended on Feb. 28.
Beer will become even more important since management announced the sale of its lower-priced wine brands that it expects will close this quarter. That will leave Constellation with higher-priced premium wines that have a bigger margin.
The wine and spirits division generated a 19.5% operating margin versus 39.7% for the beer business. The divestiture fits into management's strategy of offering higher-priced products.
Still, these steps don't address sluggish sales. Constellation's fourth-quarter sales increased a tepid 1% to $2.2 billion. Thanks to cost cutting, operating income grew 6%.
Management also lowered it medium-term sales outlook to an annual 2% to 4% from its previous 6% to 8% expectation. While Constellation Brands generates virtually all of its sales in the United States (over 98% in the latest fiscal year), the implementation of tariffs could impact its cost structure or dampen demand should Constellation have to raise prices.
Anheuser-Busch InBev
Anheuser-Busch sells its products, mostly beer (88% of 2024 revenue) globally. These include popular brands like Budweiser, Corona, and Beck's.
Breaking out last year's $59.8 billion in revenue, 76.5% came from outside of North America. That gives Anheuser-Busch greater global diversification that helps offset weakness in a particular geographic region of the U.S.
Additionally, since the company makes and sells most of its beer in the local markets in which it operates, the company is largely shielded from higher tariffs, management stated earlier this year. That's a positive for near-term results.
Still, Anheuser-Busch has also been experiencing sluggish top-line growth. Last year's revenue inched up 0.6%. It beer volume has been on a multiyear decline.
First-quarter sales growth wasn't much better. The company's adjusted top line increased 1.5%. Anheuser-Busch had lower volumes during the period. While it maintained or grew market share in 60% of its markets, that means it lost share in 40%
Take a pass
The share prices of Constellation Brands and Anheuser-Busch have been on divergent paths. Over the last year through the close of June 12, the former lost 34.5% while the latter gained 15.6%. The S&P 500 index appreciated 10.5% during this time.
However, while Anheuser-Busch's global presence and insulation from tariffs would seem to give it an edge, I'd pass on both companies' stocks right now. Neither one has produced meaningful sales growth. Until one does, I'd stay away and find better stock investments in the consumer staples sector.
